2016 (10) TMI 948 - AT - Central Excise

Denial of CENVAT credit - purchase of inputs - MS billets - MS ingots - whether the denial of CENVAT credit on the ground that the credit availed without receiving the inputs, justified? - Held that - The show cause notice have nowhere disclosed the source of several invoices (about 620 in number) purported to have been issued by Rathi Ispat Ltd, for sale of materials to the appellant on the basis of which the transporter-Pramod Sachdeva was confronted. Further, the said invoices are not part of the relied upon documents in the show cause notice. - As such, the appellant also did not have any opportunity to comment on those invoices, as admittedly the copy of such invoices was never made available to the appellants. We further find that the Ld. Commissioner have failed to exercise the jurisdiction vested on him by not ensuring the presence of the witnesses of the Revenue, whose statements have been relied upon, in raising the demand against the appellant. The Ld. Commissioner have also failed to examine the witnesses of the Revenue in the course of adjudication proceedings and to further offer the witnesses for cross-examination, which is in clear violation of provisions of Section 9D of the Central Excise Act, thus, vitiating the impugned order. The allegations of family concern on the appellant (company) viz-a-viz Rathi Ispat Ltd., is vague and no averment supporting the same have been made either in the SCN nor any findings recorded in the Order-in-Original. Under the facts and circumstances, there being no suppression of facts and/or contumacy conduct on the part of the appellant, the extended of limitation is not invokable, on this score also, the tax and penalty are fit to be set aside. The appellant entitled to take back the Cenvat Credit debited in their register by way of pre deposit during the pendency of this appeal with interest, as per Rules - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Disallowance of Cenvat Credit.
2. Imposition of penalties.
3. Confiscation of plant, building, and machinery.
4. Allegation of non-receipt of materials.
5. Extended period of limitation.
6. Denial of cross-examination.
7. Allegation of family concern between appellant and Rathi Ispat Ltd.
8. Validity of statements and documentary evidence.

Detailed Analysis:

1. Disallowance of Cenvat Credit:
The appellant, a manufacturer of excisable goods, was disallowed Cenvat Credit amounting to ?2,45,49,032/- for the period from 01.05.2000 to 31.12.2000. The disallowance was based on the allegation that the appellant availed Cenvat Credit without actually receiving the material or inputs. The appellant contested this disallowance, arguing that they had regularly filed statutory returns and maintained records, which were periodically audited by the Departmental officers. The appellant also provided detailed submissions and evidence showing the receipt and utilization of inputs, proper accounting in RG-23A and form-IV registers, and clearance of finished goods on payment of duty.

2. Imposition of Penalties:
Penalties were imposed under Rule 57 AH read with Rule 173 Q of CER 1944, along with interest, and a personal penalty on the appellant's Manager (Finance) and the owner of M/s Sachdeva Transporter. The appellant argued that the penalties were based on unsubstantiated allegations and statements of employees of Rathi Ispat Ltd., which were contradictory and not supported by documentary evidence. The Tribunal found that the statements were vague and unsubstantiated, and the penalties were not justified.

3. Confiscation of Plant, Building, and Machinery:
The appellant's plant, building, and machinery were confiscated under Rule 173 Q(2) with an option to redeem on payment of ?25 lakhs. The Tribunal found that the confiscation was based on unsubstantiated allegations and vague statements, and thus, the confiscation order was set aside.

4. Allegation of Non-receipt of Materials:
The revenue alleged that the appellant availed credit on MS billets/Ingots and SS Flats without receiving the same from Rathi Ispat Ltd. The appellant provided evidence of receipt of materials, proper accounting, and clearance of finished goods. The Tribunal found that the revenue's allegations were based on vague and unsubstantiated statements and that the appellant had maintained proper records and made payments through banking channels.

5. Extended Period of Limitation:
The appellant contested the show cause notice on the grounds that there was no element of suppression, and thus, the extended period of limitation was not invokable. The Tribunal agreed with the appellant, finding no suppression of facts or contumacious conduct, and held that the extended period of limitation was not applicable.

6. Denial of Cross-examination:
The appellant requested cross-examination of the persons whose statements were relied upon by the revenue. The Tribunal found that the denial of cross-examination was a violation of the principles of natural justice, as per the ruling of the Supreme Court in the case of Andman Timber Industries. The Tribunal held that the denial of cross-examination vitiated the impugned order.

7. Allegation of Family Concern between Appellant and Rathi Ispat Ltd.:
The revenue alleged that the appellant and Rathi Ispat Ltd. were family concerns. The appellant contested this, stating that there was no interconnection or common directors. The Tribunal found that the allegation was vague and unsupported by any evidence, and thus, no adverse inference could be drawn.

8. Validity of Statements and Documentary Evidence:
The Tribunal found that the statements of the employees of Rathi Ispat Ltd. and the transporter Pramod Sachdeva were vague, contradictory, and made under undue influence. The Tribunal also found that the show cause notice did not disclose the source of the invoices purportedly issued by Rathi Ispat Ltd., and these invoices were not part of the relied upon documents. The Tribunal held that the demand was based on unsubstantiated invoices, and thus, could not be sustained.

Conclusion:
The Tribunal set aside the impugned order, allowing the appellant to take back the Cenvat Credit debited during the pendency of the appeal with interest. The appeal was allowed, and the appellant was entitled to consequential benefits in accordance with law.